Let us understand Turn Around of Indian Railways .

Get ready for more frequent hikes in rail fares. In a move aimed at increasing the earnings of the cash-strapped railways, the cabinet on Thursday approved an “independent” tariff body for the state-owned transporter.

The setting up of Rail Tariff Regulatory Authority will largely de-link passenger fares from political process. Populism practised by successive rail ministers left the fares — a political hot potato — largely unchanged for 10 years, till January.

It has taken a toll on the financial health of the railways, which carries 23 million people a day.

The railway ministry is looking to review fares and freight charges again in October. The tariff authority is likely to preside over the exercise now.

As freight has been cross-subsiding passenger fares, losses in the passenger segment have been mounting and are expected to touch R25,000 crore this financial year. This will be a four-fold increase over the figure of Rs. 6,159 crore in 2004-05.

In contrast, input costs of the railways, the world’s third largest train system, increased by 10.6% every year between 2004-05 and 2010-11.

An executive order will be brought to allow the authority to start work with immediate effect.

The rail tariff regulatory authority bill will have to be ratified by Parliament by amending the Railway Act of 1989.

The authority would invite suggestions from all stakeholders, including consumer and citizen groups, and function as a “strong guiding factor” in fixing tariffs, an official told HT on condition of anonymity.

A retired RBI deputy governor or retired chairman of a PSU bank will head the five-member body. Two members will be former rail officials and remaining will be ‘outside experts’.

The idea of a tariff authority was mooted in 2011 when Dinesh Trivedi was the minister, but was put in cold storage.

Delivering the rail budget speech early this year, Pawan Kumar Bansal, who resigned in May, again announced the authority and sent it for inter-ministerial consultations.